Timor-Leste (East Timor)

Politics:

• Background

  Timor-Leste: Key figures

  Jose Alexandre “Xanana” Gusmao

  Mr Gusmao, the nation's first president, is widely regarded as Timor-Leste's independence hero. He did not run for re-election in the May 2007 presidential election, but secured the post of prime minister following the 2007 parliamentary election as leader of the Congresso Nacional da Reconstrucao de Timor (National Congress for Timorese Reconstruction).

  Jose Ramos-Horta

  Mr Ramos-Horta was elected president as an independent in May 2007. He had previously been interim prime minister following the resignation of Mari Alkatiri in June 2006, and has also held the positions of foreign minister and defence minister in the Alkatiri administration. He was awarded the Nobel peace prize in 1996 (together with Bishop Carlos Ximenes Belo) for working towards a just and peaceful solution to the conflict in Timor-Leste. He had fled Timor-Leste three days before Indonesian troops invaded in 1975, and spent the following two decades in exile, lobbying foreign governments and the UN. He survived an assassination attempt in February 2008.

  Mari Alkatiri

  The country's first prime minister and Fretilin's secretary-general, Mr Alkatiri was a founding member of the Frente Revolucionaria do Timor-Leste Independente (Fretilin, Revolutionary Front for an Independent Timor-Leste). He left Timor-Leste on the eve of the Indonesian invasion in 1975 as part of an international mission to gather support for the newly proclaimed Democratic Republic of Timor-Leste. He spent the following 24 years in exile, mainly in Mozambique. As prime minister, however, he struggled to live up to the expectations of the electorate, and although he was re-elected as the party's leader in May 2006, he was forced to resign as prime minister the following month.

  The judiciary

  Timor-Leste's legal system is inadequate, and its legal institutions are fragile. During the Indonesian occupation, the Timorese did not hold positions of responsibility in the justice administration. The departure of judges, prosecutors and court clerks in 1999 therefore left a dearth of legal capabilities in Timor-Leste. The judicial infrastructure, including court houses and detention centres, also suffered extensive damage in the immediate aftermath of the 1999 popular consultation. One of the most worrying ongoing problems is the failure to establish a strong judiciary comprising national judges. In January 2005 it was reported that all 22 national judges had failed an evaluation test and were therefore not eligible for conversion from probationary to career judges; 20 were to continue with advanced training.

  The legislature

  The legislature is a unicameral national parliament. Electoral reforms passed in May 2007 reduced the number of parliamentary seats from 88 to a maximum of 65. Although Fretilin was the dominant force in the first parliamentary term, the second parliament is more balanced, with a coalition government that holds a slim majority on one side and a Fretilin-dominated opposition on the other. However, this has yet to encourage the development of a more conciliatory style of politics.

  Media services

  Although freedom of the press is guaranteed under the constitution, and the government generally respects such rights, in recent years journalists have been subjected to violent attacks. This was most notable in the run-up to the 2007 presidential and parliamentary elections. Intimidation and self-censorship have, therefore, hampered the development of a genuinely free press. There are two daily newspapers, the largest of which is the Suara Timor Lorosae, and there are two weekly newspapers and a small number of newspapers that do not publish on a regular basis. Legislation was passed in May 2002 to create a public broadcasting service, subsequently enabling the government to operate a radio station that can broadcast nationwide, reaching 90% of the population. There is also a small number of private and community stations. A government television station broadcasts only in Dili.

  Democracy index (for methodology, see Appendix)

  The Economist Intelligence Unit's 2008 democracy index ranks Timor-Leste 47th out of 167 countries, putting it among the countries considered "flawed democracies". This designation includes Indonesia, Malaysia and Papua New Guinea. Timor-Leste gets a high score for its electoral process. The 2007 presidential and parliamentary elections were competitive and provided the electorate with a range of choices. The elections also proved to be largely free and fair. Although voter turnout is generally high, low literacy levels prevent Timor-Leste from obtaining a higher score for political participation. The government functions reasonably well, and although the powers of the president are narrow, the presidential post is a coveted one and does provide a checks-and-balances role. The fledging nation, however, does have serious problems with corruption. There are also some issues of concern in terms of civil liberties, owing primarily to the performance of the poorly trained local police force. The situation is, however, improving.

  Democracy index
  	Overall score	Overall rank	Electoral process	Government functioning	Political participation	Political culture	Civil liberties	Regime type
  Timor-Leste	7.22	47	8.67	6.79	5.56	6.88	8.24	Flawed democracy
  Overall and component scores are on a scale of 0 to 10; overall rank is out of 167 countries.

  Download text file (csv format)

  June 10, 2008

• Structure

  Timor-Leste: Political structure

  Official name

  Democratic Republic of Timor-Leste

  Head of state

  The president, directly elected by universal adult suffrage for a five-year term. Jose Ramos Horta, the country's second democratically elected president, took office in May 2007

  The executive

  Following the June 2007 parliamentary election, a coalition government, led by Jose Alexandre "Xanana" Gusmao as prime minister, was sworn into office in August of that year

  National legislature

  Unicameral national parliament, which currently has 65 members (down from 88 members in the inaugural 2002-07 parliament)

  National elections

  A presidential election was held in May 2007, and a legislative election took place in June 2007. The next presidential and legislative polls are due in 2012

  National government

  The Alianca com Maioria Parlamentar (APM, Alliance of the Parliamentary Majority), a four-party coalition. In addition to the Congresso Nacional da Reconstrucao de Timor (National Congress for Timorese Reconstruction), which has 18 parliamentary seats, the other APM members are the Partido Democratico (Democratic Party), which has eight seats, and the existing alliance of the Associacao Social-Democrata de Timor (Timorese Association of Social Democrats) and the Partido Socialista Democrata (Social Democratic Party), which won 11 seats in the June 2007 poll

  Main political organisations

  Frente Revolucionaria do Timor-Leste Independente (Fretilin, Revolutionary Front for an Independent Timor-Leste); Partido Democratico (PD, Democratic Party); Partido Socialista Democrata (PSD, Democratic Socialist Party); Associacao Social-Democrata de Timor (ASDT, Timorese Association of Social Democrats), Congresso Nacional da Reconstrucao de Timor (CNRT, National Congress for Timorese Reconstruction)

  Prime minister: Jose Alexandre "Xanana" Gusmao

  Key ministers

  Development: Joao Goncalves

  Education, culture & youth: Joao Cancio

  Finance & planning: Emilia Pires

  Foreign affairs & co-operation: Zacarias da Costa

  Health: Nelson Martins

  Infrastructure: Pedro Lay

  Justice: Lucia Lobato

  State administration: Arcangelo Leite

  Tourism, commerce, & industry: Gil da Costa Alves

  January 21, 2010

Economy:

• Background

  Timor-Leste: Economic background

  Timor-Leste is primarily a low-productivity agricultural economy. According to data from the Asian Development Bank (ADB), the agricultural sector (including forestry and fisheries) has accounted for an increasing share of GDP, rising from 27.3% in 2002 to 32.2% in 2006. It also accounts for the vast majority of employment in the economy, with around 90% of the population relying on agriculture and the subsistence economy for their livelihoods. The services sector (including public services and those provided by the UN and other donors) accounted for 55.1% of GDP in 2006, down slightly from 57.1% in 2002. Industry has remained relatively small, accounting for 12.8% of GDP in 2006.

  Real GDP by sector
  (% share of GDP)
  	2002	2003	2004	2005	2006
  Agriculture	27.3	29.0	30.6	31.8	32.2
  Industry	15.7	14.1	14.0	15.2	12.8
  Manufacturing	3.2	3.4	3.4	3.4	2.6
  Services	57.1	56.9	55.4	53.0	55.1
  Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 2007.

  Download text file (csv format)

  June 10, 2008

• Structure

  Timor-Leste: Economic structure

  	2005(a)	2006(a)	2007(a)	2008(b)	2009(b)
  Non-oil GDP at current prices (US$ m)	332.0	327.0	398.0	499.0(a)	599.0
  Real non-oil GDP growth (%)(c)	6.2	-5.8	8.4	12.8(a)	7.2
  Population ('000)	987	1,015	1,041	1,065	1,087
  Consumer price inflation (av; %)	1.8	4.1	8.9	7.6(a)	4.0
  Merchandise exports (US$ m)(d)	8.0	9.0	7.0	14.0	10.0
  Merchandise imports (US$ m)	-112.0	-101.0	-176.0	-353.0	-440.0
  Current-account balance incl official transfers (US$ m)	260.0	540.0	1,177.0	2,021.0	1,127.0
  Foreign-exchange reserves (US$ m)	153.3	83.8	230.3	210.4	257.4
  (a) Actual. (b) IMF estimates. (c )Excludes locally paid compensation of UN peacekeeping mission staff. (d) Excludes re-exports and oil and gas revenue.

  Download text file (csv format)

  January 21, 2010

• Outlook

  Timor-Leste: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Timor-Leste has enjoyed a period of relative calm over the past year; despite its slim parliamentary majority, the coalition government remains stable and its members willing to work together to pass important laws. In the budget for 2010 the government intends to withdraw an amount equivalent to the "estimated sustainable income" from the Petroleum Fund. Its main priority remains the development of the country's infrastructure. For the non-oil economy, the main growth stimulus in 2010-11 is expected to come from public investment.

  DOMESTIC POLITICS: Timor-Leste has been relatively calm since the surrender in April 2008 of a group of army rebels suspected of being behind the February 2008 assassination attempts on the president, Jose Ramos Horta, and the prime minister, Jose Alexandre "Xanana" Gusmao, but there remains a risk of political instability in 2010-11. Although the government has sought to play down the threat of another military insurrection or renewed conflict between the military and the police, tensions and a lack of professionalism still plague the security sector. The handover of policing responsibilities from the UN Integrated Mission in Timor-Leste (UNMIT) to the National Police of Timor-Leste (PNTL) could trigger instability, given the ill discipline and lack of basic policing skills prevalent in the PNTL. However, the police are eager to re-establish their independence, and are increasingly chafing against the supervisory role that was assigned to the UN following a violent uprising in the capital, Dili, in 2006. Meanwhile, the army, which has not been subject to similar supervision by the UN and is resistant to international scrutiny, still sees a role for itself in maintaining internal security—a stance that could bring it into conflict with the PNTL, which has itself moved towards a more paramilitary style of policing. After a troubled few years, the normal business of politics has resumed in Timor-Leste and rivalry between the main political parties remains intense. The Frente Revolucionaria do Timor-Leste Independente (Fretilin, Revolutionary Front for an Independent Timor-Leste) won the largest proportion of votes cast in the legislative election in June 2007, at 29%. However, it failed to secure enough votes to form a government on its own (the position that it had enjoyed in the previous parliament), and this enabled Mr Gusmao's party, the Congresso Nacional da Reconstrucao de Timor (National Congress for Timorese Reconstruction), to secure the support that it required from other parties to enable it to build a parliamentary majority and form a government. This coalition government has been surprisingly stable, and its member parties have been prepared to vote together on major issues. Fretilin has acted as an effective opposition by engaging in debate over policy and drawing attention to potential corruption within the government.

  INTERNATIONAL RELATIONS: The current administration is expected to maintain close relations with the UN during 2010-11. In February 2009 the UN Security Council extended UNMIT's mandate by a year, to February 2010; Mr Horta had called for the UN mandate to be extended further, to 2012, the year in which the next presidential and parliamentary elections are due. The UN is expected to remain in the country until after the polls. Timor-Leste continues to enjoy strong support from regional allies, particularly Australia and New Zealand, as well as from Portugal, which governed the country until 1975. The government is eager for Timor-Leste to join the ASEAN, and has set up an ASEAN National Secretariat to prepare the country for membership of the organisation. Timor-Leste's leadership is keen to avoid increasing tensions with Indonesia, the former occupying power, and to continue to promote reconciliation. The government recognises that establishing a close relationship with Indonesia is crucial to Timor-Leste's future security and prosperity. It has accepted the findings of a joint Commission of Truth and Friendship (CTF) with Indonesia, which was designed mainly to promote good relations rather than to bring to justice the perpetrators of the violence surrounding the 1999 independence referendum. The CTF's final report laid much of the blame for the violence at the door of Indonesia's military (TNI) and called for the TNI to apologise formally. Indonesia's president, Susilo Bambang Yudhoyono, has expressed regret over the events of 1999 but has stopped short of a full apology. Both sides continue to reject calls from international human rights groups to bring to justice the perpetrators of the violence, but public support for action against these individuals appears to be growing.

  POLICY TRENDS: The government's 2010 budget sets planned spending at US$660m. This would represent a fall from estimated expenditure of US$680.9m in 2009, owing to lower spending on resettling internally displaced persons and on rice subsidies. The government has considerable net wealth, derived from revenue from gas projects in the Timor Sea which it places in its Petroleum Fund. In 2010 budgetary expenditure will require the withdrawal of US$502m from the fund, since non-oil revenue is expected to remain meagre. This planned use of money from the Petroleum Fund is equal to the estimated sustainable income (ESI) that the government believes it can take out of the fund annually without depleting it. This is the first time since 2007 that the government has proposed a withdrawal from the Petroleum Fund that does not exceed the ESI, and as a result it will avoid challenges from the opposition over the constitutionality of its budget. Spending on developing the country's infrastructure, particularly roads and clean water supply, will remain the first priority of the government. Funds are also being directed into improving agricultural infrastructure, with the aim of reducing the country's dependency on imported food. In terms of monetary policy, the government's options are limited by the fact that the country's economy is dollarised. The IMF maintains strong support for the continued use of the US dollar as the local currency, and, in its report following recent consultations, the Fund stated that stronger institutional capacity would be needed before the government could consider introducing a national currency.

  ECONOMIC GROWTH: Non-oil GDP growth (excluding locally paid compensation to UN staff) accelerated to 12.8% in 2008, according to the IMF. In 2009 economic growth was resilient in the face of the global financial crisis, at an estimated 7.2%. The large proportion of non-oil GDP accounted for by public spending limited the impact of the global recession on Timor-Leste. This component now accounts for around 50% of non-oil GDP. It is only through government spending that most people will benefit from the expansion in GDP that is taking place as a result of the development of the country's oil and gas resources. In 2010 government consumption will be reined in as the budget for spending on goods and services is slashed by 18%. However, public investment is expected to rise as more funds are ploughed into removing infrastructure bottlenecks. Annual economic growth (excluding the hydrocarbons sector) is expected to stabilise in the 7 8% range in 2010-11. The external sector will continue to exert a significant drag on GDP growth. Timor-Leste's export base is extremely narrow, with coffee accounting for about 90% of non-oil exports. In 2010-11 export revenue will continue to be dwarfed by the country's import bill, resulting in a substantial trade deficit.

  INFLATION: Although consumer prices edged up during the third quarter of 2009, the general price level remained below that recorded in the year-earlier period, according to the consumer price index (CPI) compiled by the National Directorate of Statistics. Prices rose by 0.5% quarter on quarter in July-September, but fell by 1.9% year on year. This slowed the average year-on-year rate of inflation in the first three quarters of the year to 1.1%. The year-on-year fall in prices in the third quarter primarily reflected a drop in prices for food, which has a weighting of 57% in the CPI basket. Food prices were down by 3.2% year on year in the third quarter. There was also a sharp drop in prices in the transport and communications category of the CPI in third quarter, a trend that was in line with lower transport costs owing to the substantial fall in fuel prices. In the third quarter transport prices were down by 15.9% year on year. There were also small declines in prices in three other categories, namely healthcare; recreation and education; and household furnishings, supplies and services. However, some categories of the CPI continued to follow an upward trend. Prices for housing (consisting of rent plus utility charges) continued to increase year on year in third quarter, rising by 3%, while prices for clothing and footwear jumped by 6.3%. Prices for alcohol and tobacco edged up by 0.9%.

  EXTERNAL ACCOUNT: Reflecting the country's small export base and its heavy reliance on imports, the merchandise trade deficit remains large. The merchandise import bill stood at US$54.5m in the third quarter of 2009. Although the import bill has continued to fall from the high of US$102.1m that it reached in the fourth quarter of 2008, it remains large compared with the country's exports. In the third quarter of 2009 the value of merchandise exports (consisting mainly of coffee) stood at just US$2.9m, down from US$6.3m in the third quarter of 2008. The main reason for the drop in the import bill in recent quarters has been the lower cost of imports of petroleum products: the value of such imports fell to US$7.8m in the third quarter of 2009, down from an average of US$17m in the preceding four quarters. Other leading imports in the third quarter of the year were vehicles (costing US$11.2m), machinery and parts (US$5.2m), electrical equipment (US$4.9m) and cement (US$1.3m). In line with the drop in imports, the merchandise trade deficit narrowed to US$51.6m in the third quarter, from US$73.9m in the second quarter.

  January 01, 2010

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Country Briefing

Land area

14,609 sq km

Population

924,642 (2004 census)

Climate

Tropical

Weather

Heavy monsoon rains, followed by a pronounced dry season. The north coast has a brief rainy season from December to February; the south coast has a double rainy season from December to June, with a break in March

Languages

Portuguese and Tetum (official languages); English and Bahasa Indonesian (working languages); numerous local languages are also in use

Measures

Metric system

Currency

US dollar (US$) = 100 centavos

Time

8 hours ahead of GMT

Public holidays

January 1st (New Year's Day); April 2nd (Good Friday); May 20th (Independence Day); August 15th (Assumption); August 30th (Popular Consultation Day); September 20th (Liberation Day); November 1st (All Saints' Day); November 2nd (All Souls' Day); November 12th (Santa Cruz Day); November 28th (Proclamation of Independence Day); December 8th (Immaculate Conception Day); December 25th (Christmas Day).

January 21, 2010